Market Overview

Amazon's AWS Is 10 Years Old: A Look Backward And Forward

Amazon's AWS Is 10 Years Old: A Look Backward And Forward

In 2006,, Inc. (NASDAQ: AMZN) made its web-scale application infrastructure, which was until then being used for its own e-commerce platform, available to external users. With this move, the company marked the beginning of the public cloud movement.

“This business, Amazon Web Services (AWS), has maintained its first mover advantage over the last decade and continues to be the clear leader in the public cloud space by revenue,” Goldman Sachs’ Heath Terry said in a report. He maintains a Buy rating on Amazon, with a price target of $1,010.

10 Years To $10 Billion

AWS has made significant progress over the past 10 years. The business generated $11.1 billion in LTM [Trailing Twelve Months] revenue, which is more than fourfold the revenue reported by its largest competitor Microsoft Corporation (NASDAQ: MSFT)' Azure, Terry noted.

AWS has over 1 million active customers and is growing at 61 percent year-over-year LTM, with 29 percent operating margins.

Current And Future Trends

Terry mentioned the following trends:

  • Public cloud adoption is still in early stages.
  • Organizations are beginning to use multiple public clouds, which indicates that “basic compute and storage offerings can be substituted between vendors.”
  • Most organizations would use at least one public cloud over the next few years.
  • Price cuts by one vendor are decreasingly triggering a rate reduction by other vendors.
  • Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s GCP (Google Cloud Platform) is perceived as being cheaper than competing products.

Expectations For Amazon

The analyst believes AWS will continue to be the leader and expects its market share to increase from 35 percent share of the public cloud market in 2015 to 40 percent in 2020. He estimated AWS revenue at $12.4 billion for 2016, representing 57 percent growth.

Terry expects growth to gradually slow to 55 percent in 2017 and to 49 percent in 2018 to reach $28.5 billion in revenue. “Meanwhile, we expect AWS operating margins to stay roughly flat over the next two years.”

Latest Ratings for AMZN

Jan 2021Morgan StanleyMaintainsOverweight
Nov 2020China RenaissanceUpgradesHoldBuy
Nov 2020CitigroupMaintainsBuy

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